The purpose of market research is to provide relevant data that will help solve marketing problems a business will encounter. This is absolutely necessary in the start-up phase. Conducting thorough market surveys is the foundation of any successful business. In fact, strategies such as market segmentation (identifying specific segments within a market) and product differentiation (creating an identity for your product or service that separates it from your competitors') would be impossible to develop without market research.

Whether you're conducting market research using the historical, experimental, observational or survey method, you'll be gathering two types of data. The first will be "primary" information that you will compile yourself or hire someone to gather. Most information, however, will be "secondary," or already compiled and organized for you. Reports and studies done by government agencies, trade associations, or other businesses within your industry are examples of the latter. Search for them, and take advantage of them.

Primary Research
When conducting primary research using your own resources, there are basically two types of information that can be gathered: exploratory and specific. Exploratory research is open-ended in nature; helps you define a specific problem; and usually involves detailed, unstructured interviews in which lengthy answers are solicited from a small group of respondents. Specific research is broader in scope and is used to solve a problem that exploratory research has identified. Interviews are structured and formal in approach. Of the two, specific research is more expensive.

When conducting primary research using your own resources, you must first decide how you will question your target group of individuals. There are basically three avenues you can take: direct mail, telemarketing or personal interviews.

Direct Mail
If you choose a direct-mail questionnaire, be sure to do the following in order to increase your response rate:

Make sure your questions are short and to the point.

Make sure questionnaires are addressed to specific individuals and they're of interest to the respondent.

Limit the questionnaire's length to two pages.

Enclose a professionally prepared cover letter that adequately explains what you need.

Send a reminder about two weeks after the initial mailing. Include a postage-paid self-addressed envelope.

Unfortunately, even if you employ the above tactics, response to direct mail is always low, and is sometimes less than five percent.

Phone Surveys
Phone surveys are generally the most cost-effective, considering overall response rates; they cost about one-third as much as personal interviews, which have, on average, a response rate which is only 10 percent. Following are some phone survey guidelines:

At the beginning of the conversation, your interviewer should confirm the name of the respondent if calling a home, or give the appropriate name to the switchboard operator if calling a business.

Pauses should be avoided, as respondent interest can quickly drop.

Make sure that a follow-up call is possible if additional information is required.

Make sure that interviewers don't divulge details about the poll until the respondent is reached.

As mentioned phone interviews are cost-effective but speed is another big advantage. Some of the more experienced interviewers can get through up to 10 interviewers an hour (however, speed for speed's sake is not the goal of any of these surveys), but five to six per hour is more typical. Phone interviews also allow you to cover a wide geographical range relatively inexpensively. Phone costs can be reduced by taking advantage of cheaper rates during certain hours.

Personal Interviews
There are two main types of personal interviews:

The group survey.
Used mostly by big business, group interviews can be useful as brainstorming tools resulting in product modifications and new product ideas. They also give you insight into buying preferences and purchasing decisions among certain populations.

The depth interview.
One-on-one interviews where the interviewer is guided by a small checklist and basic common sense. Depth interviews are either focused or non-directive. Non-directive interviews encourage respondents to address certain topics with minimal questioning. The respondent, in essence, leads the interview. The focused interview, on the other hand, is based on a pre-set checklist. The choice and timing of questions, however, is left to the interviewer, depending on how the interview goes.

When considering which type of survey to use, keep the following cost factors in mind:

Mail.
Most of the costs here concern the printing of questionnaires, envelopes, postage, the cover letter, time taken in the analysis and presentation, the cost of researcher time, and any incentives used.

Telephone.
The main costs here are the interviewer's fee, phone charges, preparation of the questionnaire, cost of researcher time, and the analysis and presentation of the results of the questioning.

Personal interviews.
Costs include the printing of questionnaires and prompt cards if needed, the incentives used, the interviewer's fee and expenses, cost of researcher time, and analysis and presentation.

Group discussions.
Your main costs here are the interviewer's fees and expenses in recruiting and assembling the groups, renting the conference room or other facility, researcher time, any incentives used, analysis and presentation, and the cost of recording media such as tapes, if any are used.

Secondary Research

Secondary data is outside information assembled by government agencies, industry and trade associations, labor unions, media sources, chambers of commerce, etc., and found in the form of pamphlets, newsletters, trade and other magazines, newspapers, and so on. It's termed secondary data because the information has been gathered by another, or secondary, source. The benefits of this are obvious--time and money are saved because you don't have to develop survey methods or do the interviewing.

Secondary sources are divided into three main categories:

Public.
Public sources are the most economical, as they're usually free, and can offer a lot of good information. These sources are most typically governmental departments, business departments of public libraries, etc.

Commercial.
Commercial sources are equally valuable, but usually involve costs such as subscription and association fees. However, you spend far less than you would if you hired a research team to collect the data firsthand. Commercial sources typically consist of research and trade assocations, organizations like SCORE (Society Corps of Retired Executives) and Dun & Bradstreet, banks and other financial institutions, publicly traded corporations, etc.

Educational.
Educational institutions are frequently overlooked as viable information sources, yet there is more research conducted in colleges, universities, and polytechnic institutes than virtually any sector of the business community.

Government statistics are among the most plentiful and wide-ranging public sources of information. Start with the Census Bureau's helpful Hidden Treasures--Census Bureau Data and Where to Find It! In seconds, you'll find out where to find federal and state information. Other government publications that are helpful include:

Statistical Abstract of the United States. Data books with statistics from numerous sources, government to private.

U.S. Global Outlook. Traces the growth of 200 industries and gives five-year forecasts for each.

Don't neglect to contact specific government agencies such as the Small Business Administration (SBA). They sponsor several helpful programs such as SCORE and Small Business Development Centers (SBDCs) which can provide you with free counseling and a wealth of business information. The Department of Commerce not only publishes helpful books like the U.S. Global Outlook, it also produces an array of products with information regarding both domestic industries and foreign markets through its International Trade Administration (ITA) branch. The above items are available from the
U.S. Government Printing Office
.

One of the best public sources is the business section of public libraries. The services provided vary from city to city, but usually include a wide range of government and market statistics, a large collection of directories including information on domestic and foreign businesses, as well as a wide selection of magazines, newspapers and newsletters.

Almost every county government publishes population density and distribution figures in accessible census tracts. These tracts will show you the number of people living in specific areas, such as precincts, water districts or even 10-block neighborhoods. Other public sources include city chambers of commerce or business development departments, which encourage new businesses in their communities. They will supply you (usually for free) with information on population trends, community income characteristics, payrolls, industrial development, and so on.

Among the best commercial sources of information are research and trade associations. Information gathered by trade associations is usually confined to a certain industry and available only to association members, with a membership fee frequently required. However, the research gathered by the larger associations is usually thorough, accurate and worth the cost of membership. Two excellent resources to help you locate a trade association that reports on the business you're researching are Encyclopedia of Associations (Gale Research) and Business Information Sources (University of California Press) and can usually be found at your local library.

Research associations are often independent but are sometimes affiliated with trade associations. They often limit their activities to conducting and applying research in industrial development, but some have become full-service information sources with a wide range of supplementary publications such as directories.

Educational institutions are very good sources of research. Research there ranges from faculty-based projects often published under professors' bylines to student projects, theses and assignments. Copies of student research projects may be available for free with faculty permission. Consulting services are available either for free or at a cost negotiated with the appropriate faculty members. This can be an excellent way to generate research at little or no cost, using students who welcome the professional experience either as interns or for special credit. Contact the university administration departments and marketing/management studies departments for further information. University libraries are additional sources of research.